Credit

A credit report is a detailed record of your credit history. Here's a breakdown of what it typically includes:

• Credit Payment History: This records your history of repaying debts and whether you have missed payments.
• Income Information: Some credit reports may include details about your income.
• Debts and Loans: Information about your current debts, such as credit card balances, loans, and mortgages.
• Credit Accounts: Details about any credit or charge accounts you have applied for or currently hold.
• Public Records: This section can include information about lawsuits, arrests, and bankruptcies.

• Consumer Reporting Agencies (CRAs): These agencies, commonly known as credit bureaus, maintain and sell your credit report. Examples of CRAs include Equifax, Experian, and TransUnion.

If you have applied for a credit or charge account, a personal loan, insurance, or even a job, you likely have a credit record on file.

Your credit report is crucial because it's used by lenders, insurers, and sometimes employers to make decisions about your financial responsibility.

Yes, If you request it, the Consumer Reporting Agency (CRA) must provide you with everything in your credit report, including medical information and, in most cases, the sources of the information. Additionally, the CRA must give you a list of everyone who has requested your report within the past year. For employment-related requests, the CRA must provide a list of those requests within the past two years.

This ensures transparency and allows you to keep track of who is accessing your credit information.

Credit bureaus collect and sell four basic types of information:

Identification and Employment Information
Your name, birth date, Social Security number, employer, and spouse's name are routinely noted. The CRA may also provide information about your employment history, home ownership, income, and previous addresses if requested by a creditor.

Payment History
Your accounts with various creditors are listed, showing the amount of credit extended and whether you've paid on time. Related events, such as the referral of overdue accounts to a collection agency, may also be noted.

Inquiries
CRAs must keep a record of all creditors who have requested your credit history within the past year and a record of those who have requested your credit history for employment purposes within the past two years.

Public Record Information
Events that are a matter of public record, such as bankruptcies, foreclosures, or tax liens, may appear in your report.

Credit scoring is a system used by creditors to help determine whether to grant you credit. It involves collecting information about your credit experiences, such as your bill-paying history, number and type of accounts, late payments, collection actions, outstanding debt, and the age of your accounts. This data is gathered from your credit application and credit report. Creditors use a statistical program to compare your information with that of other consumers with similar profiles. Points are awarded for each factor that helps predict the likelihood of repaying a debt. The total number of points, or credit score, indicates how creditworthy you are, or how likely it is that you will repay a loan and make timely payments.

The most widely used credit scores are FICO scores, developed by Fair Isaac Company, Inc. These scores range from 350 (high risk) to 850 (low risk).

Since your credit report plays a crucial role in many credit scoring systems, it's essential to ensure its accuracy before applying for credit. To obtain copies of your report, contact the three major credit reporting agencies:

• Equifax: (800) 685-1111
• Experian (formerly TRW): (888) EXPERIAN (397-3742)
• TransUnion: (800) 916-8800

These agencies may charge up to $9.00 for your credit report.

You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian, and TransUnion. This free credit report might not include your credit score and can be requested through the following website: annualcreditreport.com.

Credit scoring uses real data and statistics, making it more reliable than subjective or judgmental methods. This system treats all applicants objectively, ensuring fairness in the credit evaluation process. Judgmental methods, on the other hand, often rely on inconsistent criteria that haven't been systematically tested and can vary widely between different individuals, leading to potential biases and inaccuracies.

Credit scoring models are developed through a detailed process:

Regulations:

• Credit scoring systems cannot use certain characteristics, such as race, sex, marital status, national origin, or religion.
• Age can be included in scoring systems, but they must treat elderly applicants equally.

This process ensures that credit scoring is fair and objective, avoiding discrimination while accurately assessing credit risk.

Credit scoring systems allow creditors to evaluate millions of applicants consistently and impartially based on many different characteristics. For these systems to be statistically valid, they must be based on a large enough sample. Remember, these systems can vary from one creditor to another.

Although such a system may seem arbitrary or impersonal, when properly designed, it can make decisions faster, more accurately, and more impartially than individuals. Many creditors design their systems to refer marginal cases—those whose scores are not high enough to pass easily or are not low enough to fail absolutely—to a credit manager. This allows for discussion and negotiation between the credit manager and the consumer, potentially leading to a decision to extend credit.

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

• Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.

• What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.

• How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.

• Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.

• How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.

If you've been denied credit or didn't get the rate or terms you wanted, it's important to take the following steps:

Ask About the Credit Scoring System:

• Inquire whether a credit scoring system was used to evaluate your application.
• Ask which characteristics or factors were considered and how you can improve your application.

Check Your Rate and Terms:

• If you are approved for credit, ask if you received the best rate and terms available.
• If not, ask why, and ensure any inaccuracies in your credit report are disputed.

Understand Your Rights Under the Equal Credit